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Pushing Boundaries: The 2015 UK Alternative Finance Industry Report

Pushing Boundaries: The 2015 UK Alternative Finance

If 2015 was the year of pushing boundaries, then 2016 will be the year that ‘alternative finance’ becomes mainstream. This joint report published by the Cambridge Centre for Alternative Finance at the University of Cambridge and Nesta, in association with KPMG and with the support of CME Group Foundation, surveyed 94 crowdfunding and P2P lending platforms to track the size and development of this new and exciting channel of finance.

Highlights

Also on KPMG.com

Last year, the UK online alternative finance industry recorded substantive expansion across almost all models, equalling £3.2 billion in funding. This was an 84% increase in growth compared to the £1.74 billion in 2014. With more global market players, business models and tax incentives, the industry is on course to surpass the £5 billion mark in 2016.

Increased market share

In 2015 it is estimated that online finance platforms provided the equivalent of over 3% of all lending to SMEs (small and medium-sized enterprises) in the UK. For small businesses – those with a turnover less than £500,000 a year – P2P platforms provided almost 14% of all new bank loans.

A real estate opportunity

Real estate and housing is the most popular sector for online alternative finance investments and loans, with combined debt and equity-based funding amounting to almost £700 million in 2015.

The largest segment of the peer-to-peer business lending market is for real estate mortgages and property development, which accounted for £609 million in 2015, around 41% of the total volume of peer-to-peer business loans. Overall, peer-to-peer real estate lending financed over 600 commercial and residential developments in the UK in 2015, mostly by small to medium sized property developers.

Fraud and malpractice fears

57% of our P2P lending and equity-based respondents cited that the potential collapse of one or more of the well-known industry players (due to fraud or malpractice) as the biggest risk to market growth.